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One month to get licensed – new Consumer Credit Act

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If you engage in consumer credit activities you must complete the licence application process with the Australian Securities Investment Commission (ASIC) by 31 December 2010. After that date you must stop engaging in consumer credit activities until you are granted an Australian credit licence or have become a representative of a licensee. It is important to note that there are significant penalties for non compliance with the new NCA regime.

The legislative regime is complex, however ASIC does provide Regulatory Guides and these detail examples of different situations in which an entity may be engaging in credit activities.  If you consider that your company is engaging in a credit activity but the conduct is limited to referrals only, then the credit activity may be exempt under the National Consumer Credit Protection Act (NCA).

Summary of Licensing Requirements

The NCA requires a person to be licensed or an authorised credit representative where that that person engages in a credit activity.

A credit activity is where a person is a credit provider or performs obligations in relation to a credit contract (or even a proposed credit contract) whether the person does so as the credit provider or on behalf of the credit provider.

You need to be licensed or authorised credit representative if you are a credit provider (i.e. a lender under a consumer credit contract); and you are a provider of credit services. You are defined as providing a credit service if you:

  • provide credit assistance to a consumer or
  • act as an intermediary between a lender and a consumer in relation to a credit contract.

The exemptions for referrers are limited to circumstances where a referrer simply informs the consumer that a particular licensee or their representative is able to provide particular credit activities (eg. lending, suggesting or assisting) and how to contact them. A key feature of the legislation is disclosure to consumers of any benefit or commission you may receive for a referral to a credit provider.

MST recommends that  you assess whether your business is engaging in credit activities regulated by the Credit Act and take action without delay.  Our Corporate Advisory lawyers are available to answer any questions you have.

Author:  Susan Reece Jones